According to Shiftprocessing, the chargeback to transaction percentage is estimated to be 0.6%. That means for every 1000 transactions, 6 are chargebacks. What can you do to protect your company from chargebacks? Check out our 13 ways to keep your business safe. But before that, let’s look at what chargebacks are and how they work.
Understand What a Chargeback Is and How It Works
A chargeback is a transaction returned to the cardholder or person who made the purchase. Chargebacks can occur for various reasons, including fraud, unauthorized transactions, or merchandise that is not as described. In most cases, the customer’s bank or credit card issuer is the one that processes chargebacks. The merchant will then have an opportunity to dispute the chargeback and provide evidence that the transaction was legitimate. The customer will receive a refund if the merchant cannot prove the transaction was valid.
Chargebacks can be costly for merchants, so taking steps to prevent them from occurring is essential. For example, merchants can offer clear and concise product descriptions, process transactions quickly and efficiently, and provide excellent customer service. Below we describe chargeback prevention methods in detail.
13 Ways To Avoid Chargebacks
1)Respond Quickly to Any Disputes or Complaints From Customers
Not only will this help resolve the issues, but it can prevent chargebacks. Chargebacks are costly for businesses and may incur fees. To avoid chargebacks, respond quickly and work to resolve the issue. If a chargeback occurs, follow up with the customer and take steps to prevent it from happening again.
2)Use a Secure Payment Gateway That Encrypts Customer Data
For businesses that accept online payments, choosing a secure gateway to encrypt customer data and protect against payment gateway fraud is essential. Here are a few things to look for when choosing a payment gateway:
- Encryption: All data should be encrypted, including card numbers, expiration dates, and CVV codes
- Tokenization: This is a process of substituting sensitive data with a token, which is much more difficult to hack
- Fraud prevention: Look for a gateway that offers fraud prevention tools, such as AVS (address verification system) and CVV verification
These precautions can help reduce the risk of chargebacks and protect your customers’ information.
3) Verify Customer Information Before Completing a Sale
It’s vital to verify customer information before concluding a sale. The information you should verify includes ensuring that the billing address and zip code match the address on file with the credit card company. You should also check to see if the card is expired or if there are any other red flags. If everything looks good, then you can complete the sale with confidence. However, if you have any worries or doubts, it’s a good idea to pause the translation and not complete the sale. Taking these precautions can help reduce the number of chargebacks you receive and keep your business running smoothly.
4) Invest in Fraud Detection Software
One of the most effective ways to avoid chargebacks is to invest in fraud detection software. This software can help you identify suspicious activity before it leads to a chargeback. It can also provide valuable data to defend against chargebacks. Regarding chargebacks, an ounce of prevention is worth a pound of cure.
5) Educate Your Employees on How To Spot Fraudulent Orders
Chargebacks can be a real pain for businesses, especially if they happen regularly. Not only do they result in lost revenue, but they can also damage your reputation and cause customers to question your legitimacy. That’s why it’s so important to educate your employees on how to spot fraudulent orders. Teaching them to look for red flags like huge orders or multiple orders from the same customer can help reduce the chances of chargebacks. And if a chargeback does happen, you’ll be more likely to catch it early and minimize the damages. So don’t wait – start educating your employees today on how to avoid chargebacks. It could mean the difference between a thriving business and one struggling to stay afloat.
6) Don’t Make a Promise You Can’t Keep
One of the best ways to do this is to make sure you don’t make any promises you can’t keep. For example, if you advertise a product as being in stock but going out of stock, you may be liable for a chargeback. It’s always better, to be honest with your customers from the outset to know what to expect. This way, you can avoid any nasty surprises down the line.
7) Don’t Hold Onto Your Customers’ Money
When you accept customer payments, you essentially hold onto their money until you provide the goods or services they have bought. Accepting such payments can create many problems, including chargebacks. You can do a few things to avoid chargebacks, such as providing clear documentation of all transactions and responding quickly to any customer inquiries. These precautions can help minimize the risk of chargebacks and keep your customers’ money safe.
8) Offer Refunds
One way to reduce your risk of chargebacks is to offer refunds. If customers are dissatisfied with their purchase, they can simply return the item for a refund instead of initiating a chargeback. You should also make it easy for customers to contact you if they have any problems with their order. Prompt and efficient customer service can often prevent a chargeback from happening in the first place.
9) Ensure That the Product Descriptions Are Detailed and Relevant
Make sure that your product descriptions are relevant and detailed. You should include important information like the size, weight, dimensions, color, and material. The more specific you can be, the better. You should also have clear instructions on how to use the product. Mention any precautions needed and mention them as well. By providing this information up front, you can help avoid misunderstandings leading to chargebacks.
In addition to relevant and detailed product descriptions, it’s also essential to have clear return and refund policies on what kind of product can be returned. For example, those already used or the ones that are damaged only. Being upfront about your policies can help reduce the number of customer service issues that could lead to chargebacks.
10) Send Confirmation Emails That Are Automatic After Each Purchase
Automated emails help ensure the customer has received the product or service and is satisfied with the purchase. Automated emails help ensure the customer has received the product or service and prevent fraudulent charges. These can help build customer confidence and create repeat customers.
11) Shipping Time and Costs Should Be Transparent
As an online shopper, it’s frustrating not knowing how long it takes for an item to ship or how much it costs. This lack of transparency leads to chargebacks, which can be costly for businesses. To avoid this, ensure that freight shipping times and costs are clearly stated on your website.
Also, if you experience any delays in shipping, be sure to communicate with the customer and update them on the expected delivery date. If a customer is dissatisfied with the shipping time or cost, offer a refund or discount on their next purchase.
12) Have Instant Bank Transfers in the Checkout Section
Another exciting way to avoid chargebacks is to have instant bank transfers as a checkout option. When a customer chooses this option, the funds are transferred immediately from their account to yours. Instant bank transfers in the checkout section help avoid chargebacks because customers cannot dispute the charge if they have already received the goods or services.
13) Implement AVS and CVV During Checkout
Another way to avoid chargebacks is to require customers to enter their billing address (AVS) and the last four digits of their credit card number (CVV) during checkout. AVS and CVV are Risk-Based Authentication (RBA) measures that help verify that the customer is making the purchase and that the card information is accurate. If you have a high chargeback rate, your merchant account provider may also require you to use AVS and CVV codes to continue processing payments. So it’s essential to be familiar with how they work and how to implement them in your business.
What To Do After a Chargeback Has Happened
If you receive a chargeback, you should first contact your customer to try and resolve the issue, and if the problem is not solved, you must provide evidence to your credit card processor that the transaction was valid. This evidence may include receipts, invoices, or shipping documents.
Once you have submitted your evidence, the processor will decide whether or not to overturn the chargeback. If the chargeback is upheld, you will be responsible for returning the funds to the customer and any associated fees.
A chargeback can be a devastating event for a business. Not only does it mean that you’ve lost the sale and the potential revenue, but it also means that you’ve been accused of fraudulent activity by your customer. The good news is that if you implement the steps above, you can help avoid chargebacks and protect your company from this type of fraud.